"But if it is believed that these elementary schools will be better managed by...any other general authority of the government, than by the parents within each ward [district], it is a belief against all experience." --Thomas Jefferson

Thursday, September 18, 2014

"Well, At least, you're consistent!": University Place CDA, Your tax dollars at work

"Well, at least you're consistent!" 

We are talking about the University Place (CDA--Commercial Development Agency) in Orem. The plan is to take $63 million in future property taxes, $44 million of it from Alpine School District, and allow the developer to reinvest that money into infrastructure. The largest property owner in the City of Orem will get a $63 million tax break. If we were to give this amount in tax breaks to every business in Orem, that would be about $25,000 per business.   

Even though, this is legal, I believe it is wrong for several reasons.  And, "at least, I'm consistent!"

My fellow board member Paula Hill has an excellent commentary on this issue.  I concur!

I am reading comments about the Orem Mall (newly minted as “University Place”). I would like to explain the pros, and then give my take as to why they are wrong.

Alpine District currently receives $1,123,000 a year in property tax from the existing mall. The tax incentive plan proposes to give ASD either 25% or 50% (both have been discussed) of all property tax increase, leaving the original $1.1 million still coming in to the district. The incentive is only for the infrastructure, as ASD does not participate in residential or commercial properties. There is no “giving” of district money to anyone, any way.

This is not a backroom deal made by smarmy “suits” determined to rob the public of their fair share. These are conclusions drawn by fine administrators with good business sense. It appears to be a win-win: the incentive helps the business grow, and even though we get a small part, a small part of a lot is better than all of nothing. And of course in twenty years, we get the whole she-bang.

These are the flaws I see in the reasoning.
1. It is economic engineering, human beings peering into the next twenty years and making informed guesses, but guesses just the same.

2. It is based on false principles—the correct economic principle being allowing the free market to function, well, freely.

3. It violates two of the items on the ASD criterion for CDA’s (or RDA’s, or whatever initials we come up with)
  • We do not move money around the district. At the Orem City Council meeting, where all the Good Old Boys were explaining to us obtuse citizens, there was a lot of talk about competing with “up north,” occasionally even citing specifically Lehi’s attracting businesses. The outline at the Board discussion listed bringing out-of-state money, but the reality is there was a lot of fuss about the north end of the county. So, as a government entity we are picking winners and losers
  • We ask the unanswerable question (and guess at the answer), “Would the business go without us?” The feeling expressed was that it probably would, but not as quickly, therefore we would not get even our smaller share of property tax valuation as fast. But a cruise around the current mall shows the older area under busy construction all over the place, and the newer areas, including Costco, the theater, etc., are bustling already. Orem City website is continuously welcoming new merchants. The mall is already going without us.
There are other plans out there that are not being considered. Some Orem citizens don’t want a “walkable” town, with a high concentration of glitz and glitter in one area and essentially down-grading all other shopping. The talk was of the “halo effect” that would benefit State Street, etc., but one comment on why we were helping retail to grow in one area at the expense of others was that, well, those other stores could move to the mall too. At a city planning session (charette is the new buzz word) three of four citizen groups identified Orem City’s downtown as Center Street and State Street. Yet the planners hijacked the consensus and claimed the mall as the center of town.

Our discussion at the September 9 Board meeting included, “What do we have to lose?” meaning would we rather have a small piece of the cake or no cake at all? My response was that I am not a gambler, especially with the tax-payers’ money, but since we have to make a call I am going with the principle of the free market knowing what is best. I choose 100% of the property tax growth free enterprise will engineer, all on its own, versus one-half to one-fourth of what the “suits” are declaring we will get. It is not that I do not see the value to the district as well as to the community of the revitalization of Orem, it is that I do not believe there is a right way to do the wrong thing. And the tax incentive for University Place is the wrong thing.


  1. There are many Orem citizen's who agree with Wendy's stance regarding the government staying out of the way of the natural course of free enterprise, and that is why there is an army of petitioner's in Orem seeking signatures for a referendum on the University Place CDA. When the Alpine School District Board met with the Orem City Council members and discussed the possibility of the Alpine School District participating in the University Place CDA, the Mayor of Orem stated that the University Project would take ten years longer without the involvement of the School District. Before the City of Orem adopted the University Place CDA, there was $24 million being built in high density residential housing on the Mall property. Also, the old Nordstrom's building was already receiving a $6 million make-over, in order to house R C Willey as an Anchor Store. When the City of Orem adopted the University Place CDA it froze the property tax for the area at the 2013 property tax level for twenty years. Those Taxing Entities participating with the anticipated Tax Increment of 75% in the University Place CDA Plan will only receive 25% of the $30 million increase in the Mall property value that would be generated by the current construction taking place. Orem and the surrounding City's, such as Vineyard, are currently getting swamped with high density housing projects that will need to be filled with people, and because of this fact slowing down the University Place Project construction by not participating in the CDA with Tax Increment Financing would probably benefit the entire Utah County community, including Orem, from an overbuild of high density units. It appears that it is a win-win for the Alpine School District to not get involved in the University Place CDA Tax Increment Financing.